13-week Treasury bill auction
The US Department of the Treasury auctioned 13-week Treasury bills, or T-bills, worth $34 billion on March 21. The amount on offer was $3 billion lower than in the previous week’s auction. Overall auction demand, as represented by the bid-to-cover ratio, fell 1.7% last week. The bid-to-cover ratio fell to 3.4x from 3.5x in the previous week’s auction.
T-bills do not pay a coupon. They are offered at a discount to face value. They are redeemable at par on maturity. The high discount rate for the March 21 auction came in at 0.30%, lower than 0.34% in the previous week.
Market demand rose
Market demand for the three-month T-bills rose to 48.8% of the accepted bids last week compared to 45.4% in the previous week.
The percentage of indirect bids fell from 41.7% to 37.9%. Direct bids rose. These bids, which had formed 3.7% of accepted bids in the previous week, rose to 10.9%. Direct bidders include domestic money managers such as State Street (STT) and BlackRock (BLK).
The share of primary dealer bids fell from 54.6% in the previous week to 51.2%. Primary dealers are a group of 22 broker-dealers authorized by the Fed. They are obligated to bid at auctions and take up the excess supply. They include firms like Goldman Sachs (GS) and Citigroup (C). A fall in the percentage of primary dealer bids shows strong fundamental demand.